Real estate transfer tax on the transfer of company shares
This real estate transfer tax liability arises in two cases:
- In the case of a partnership, a transfer of shares subject to real estate transfer tax is deemed to have taken place if a property is located in the partnership and the shareholder structure changes in such a way that at least 95% of the shares in the partnership assets are transferred to new shareholders within five years.
- If the assets of a partnership or corporation include a domestic real estate property, the combination of 95% of the shares in the company owning the real estate property in the hands of the acquirer alone or in the hands of a corporate group as well as the transfer of at least 95% of all shares in the company triggers an acquisition transaction subject to real estate transfer tax.
In these cases, the real estate transfer tax amounts to 3.5% of the simple standard value in the case of agricultural and forestry real estate or 0.5% of the real estate value in the case of other real estate.
The land value can be determined in three ways:
1. flat-rate value model
2. suitable real estate price index
3. proof of the lower fair market value of a plot of land
These three options are legally completely equivalent. For each plot of land (economic unit), it is possible to freely choose which method is to be applied.
Avoidance of real estate transfer tax in case of transfer of company shares
One way to avoid real estate transfer tax in the case of a transfer of company shares is to make sure that the 95% limit is not reached. Likewise, only transfers of direct interests in the real estate company can trigger real estate transfer tax. This applies to both partnerships and corporations. Therefore, no real estate transfer tax is triggered if the shares in the parent company of the real estate company are acquired - and not directly the shares in the real estate company.
The real estate transfer tax liability in the case of a share merger can be avoided with careful and timely structuring and planning.